Preventing Medicaid Fraud Can Reap Big Rewards

An estimated $11 billion in state Medicaid spending in 2010 was an improper payment, according to the Centers for Medicare and Medicaid Services. That’s 9 percent of all state Medicaid funds spent that year, said Matt McKillop, senior researcher on the State Health Care Spending Project at the Pew Center on the States.

McKillop said improper payments can include fraud and abuse, but also includes unintentional mistakes—such as money going to the wrong person, insufficient documentation for a claim and giving the proper recipient the wrong amount of money. It’s cause for concern, he said, but state policymakers can take action to ensure those in need are getting the right services and the kind of health care they need.

McKillop was one of the featured speakers on a recent CSG South webinar, “State Efforts to Enhance Medicaid Program Integrity.” The Pew Center has a database that centralizes hundreds of anti-fraud and abuse programs enacted in the states.

“Fraud and abuse can be committed by both Medicaid providers and patients,” McKillop said, “but in our review of federal data, we found the vast majority of state strategies are focused on providers.”

McKillop said states have three basic opportunities to reduce Medicaid fraud and abuse: Screen medical providers before and after they’re accepted into the program; review medical claims before they’re paid and review claims after they’re paid; and recover any improper payments.

“For years, Kentucky has had a centralized provider enrollment process in which all providers—including managed care and network providers—must be enrolled by the Department for Medicaid Services,” McKillop said. “This gives the department greater control over who can enter the program than many states without a centralized system.”

He cited Kentucky’s thorough vetting process. The state compares providers seeking to enroll in the Medicaid system to lists of excluded providers kept by the U.S. Department of Health and Human Services, the U.S. General Services Administration and Kentucky’s sanctioned providers’ list. Providers who were once deactivated or excluded from Medicaid are checked against the CMS fraud investigation database, the Kentucky Cabinet for Health and Family Services’ fraud database, the Kentucky Secretary of State’s website and the Kentucky Department of Corrections database.

Robert Finlayson, inspector general at the Georgia Department of Community Health, said his state reaches out for the most data it can find to detect possible fraud before Medicaid payments are made.

“We have surveillance and utilization review,” he said, “tools that apply algorithms to payments and claims to make decisions on whether or not that claim, very simply, makes sense. … We share data with CMS so that Medicare and Medicaid data are compare together so we can try again to … identify scenarios where an improper payment may be about to be made and we can stop it.”

Finlayson said Georgia also identified moderate- and high-risk providers—the types of providers where fraud is more likely to occur—and has taken additional precautions before allowing them into the Medicaid program.

“We implemented site visits for all moderate- and high-risk providers so that before you become enrolled in Georgia Medicaid, an investigator comes on site to your business location and verifies you exist,” he said. “(They) verify you are able to provide services, verify that you are licensed, that you have a business license, that you have a lease that extends out for a reasonable period of time. … In short, make sure you’re actually capable of doing what you’re applying to be able to do.”

It’s not enough to focus just on providers, Finlayson noted.

“We have a member effort here in Georgia where we do quite a bit of reviews involving members,” he said. “We do take beneficiary eligibility quite seriously. We’re constantly looking either through referred individuals or some random checks that we do at verifications regarding (patient) eligibility.”

Combating Medicaid fraud may be costly and time-consuming, McKillop said, but it also appears to be worth the trouble for states to do it right.

“According to CMS estimates, states spent $394 million on program integrity efforts in the federal fiscal year 2009, which is the most recent year available,” he said. “They recovered $2.3 billion. That’s a 6-to-1 return and it doesn’t capture averted fraud and abuse. … It’s possible the return may actually be much higher.

“This suggests to us that as states look at ways to reduce healthcare costs without negatively impacting their residents—and potentially even improving their health outcomes—combatting fraud and abuse in your Medicaid program is something every state should be committed to getting right.”